Global rules on conflict-of-laws matters in international insolvency law cases: An Australian perspective

The 2012 Report “Transnational Insolvency: Global Principles for Co-operation in International Insolvency Cases” – commissioned by The American Law Institute in conjunction with The International Insolvency Institute – annexed 23 “Global Rules on Conflict-of-Laws Matters in International Insolvency Cases”. These proposed “Global Rules” are intended to “serve as legislative recommendations” to (inter alia) promote uniformity and greater certainty in the unpredictable area of conflict of laws. This article provides a brief commentary upon the 23 proposed Global Rules from an Australian perspective (comparing the effect and intent of each rule with the current Australian conflict-of-laws position) and offers some conclusions as to the merits of the “Global Rules” initiative.

Cross-Border Insolvency Law

This new work provides a comprehensive and theoretically rich discussion of the law on cross-border insolvency. It engages with several current multi-billion dollar insolvencies such as those of Nortel Networks and Lehman Brothers to provide the reader with state of the art knowledge of the complex problems posed by transnational insolvency. As the number of transnational insolvencies grows due to prevailing economic conditions, practitioners are increasingly required to navigate the mass of legal rules applicable to cross-border insolvency situations. The associated challenges are heightened by the diversity of legal structures employed by modern business entities and a patchwork of costly, inefficient, and unpredictable national legal rules. The response has been a proliferation of international legal instruments such as the UNCITRAL Model Law and the the EU Insolvency Regulation, supplemented by judicial practice, adding further layers of complexity. Writing from an Australian perspective, the authors analyse this network of legal rules and subsequent case law. In addition, they explain the theoretical underpinnings of these rules in an accessible manner to build a solid foundation for practice, facilitate advanced reasoning, and enable the development of sophisticated arguments for law reform. Comparative case law from jurisdictions such as the United States and United Kingdom is also included. This book is highly relevant to insolvency practitioners faced with the recovery of assets located in different jurisdictions, transactional lawyers for whom knowledge of potential insolvency pitfalls is essential, and academics. It is invaluable for students at both undergraduate and postgraduate level seeking a sound understanding of this challenging area of law.

Recognition and enforcement in cross-border insolvency law: A proposal for judicial gap-filling

This Article analyzes the recognition and enforcement of cross-border insolvency judgments from the United States, United Kingdom, and Australia to determine whether the UNCITRAL Model Law’s goal of modified universalism is currently being practiced, and subjects the Model Law to analysis through the lens of international relations theories to elaborate a way forward. We posit that courts could use the express language of the Model Law text to confer recognition and enforcement of foreign insolvency judgments. The adoption of our proposal will reduce costs, maximize recovery for creditors, and ensure predictability for all parties.

Australia

Crisis management in the banking sector is a topical issue in Australia. This is not because financial institutions are facing a financial crisis. Indeed, in 2012, the International Monetary Fund (IMF) noted that ‘Australia has a history of few bank failures, even fewer financial crises, and its banking sector emerged from the global financial crisis relatively well.’ Rather, crisis management of banks is topical because there has been the first full review of Australia’s banking and financial system in nearly 20 years, which has examined and raised issues about the resilience and capacity of the Australian regime in this post GFC world. At the time of writing, the Report’s recommendations, including for Australian banks to meet capital standards in line with emerging international practice, are the subject of industry debate in advance of the Australian government’s decision.

Developments in court to court communications in International insolvency cases

As business increasingly operates on a global basis, courts are called upon more often to adjudicate insolvency cases with international connections. The financial collapse of Lehman Brothers Holding Inc (‘Lehman Holdings’) provides a recent example where courts across many jurisdictions were called upon to determine issues arising from a multistate insolvent enterprise. Lehman Holdings filed for Chapter 11 bankruptcy protection in the United States on 15 September 2008. Lehman Brothers was the fourth largest investment bank in America and the largest company ever to file for bankruptcy in the United States. However the effects of its collapse were felt worldwide, including within Australia.

The certainty of tax in insolvency : where does the ATO fit?

There are several ways that the Commissioner of Taxation may indirectly obtain priority over unsecured creditors. This is contrary to the principle of pari passu, a principle endorsed by the 1988 Harmer Report as one that is a fundamental objective of the law of insolvency. As the law and practice of Australia's taxation regime evolves, the law is being drafted in a manner that is inconsistent with the principle of pari passu. The natural consequence of this development is that it places at risk the capacity of corporate and bankruptcy laws to coexist and cooperate with taxation laws. This article posits that undermining the consistency of Commonwealth legislative objectives is undesirable. The authors suggest that one means of addressing the inconsistency is to examine whether there is a clearly aligned theoretical basis for the development of these areas of law and the extent that alignment addresses these inconsistencies. This forms the basis for the recommendations made around such inconsistencies using statutory priorities as an exemplar.

Mind the insolvency gap : lessons to be learned from audit expectations gap theory

There is a general perception that public confidence in the insolvency profession is low as the result of the recent unethical practices of a few high profile liquidators. As a result, the effectiveness of the current regulatory mechanisms has been questioned, leading to a review of the performance of insolvency practitioners and subsequent regulation proposals. The challenge for the insolvency profession is balancing the expectations of the general public whilst ensuring that the obligations and duties imposed upon them are performed to acceptable and realistic standards. It is difficult (if not impossible) for the profession to meet this challenge in the absence of a cohesive framework which identifies those issues that require further regulation as opposed to those that relate to general education on the insolvency process. This paper will examine the audit expectations gap theory in the context of insolvency practitioners and suggests that a model based on this theory provides an effective framework for evaluating the regulation of the insolvency industry.

An Australian perspective on the ALI-III global principles for cooperation in International insolvency cases

In 2012, Professor Ian Fletcher (United Kingdom) and Professor Bob Wessels (The Netherlands) presented a Report to the American Law Institute and the International Insolvency Institute entitled Transnational Insolvency: Global Principles for Cooperation in International Insolvency Cases (“Global Principles”). This followed their appointment as Joint Reporters to investigate whether the essential provisions of the American Law Institute Principles of Cooperation among the North American Free Trade Agreement Countries with their annexed Guidelines Applicable to Court-to-Court Communication in Cross-border Cases may, with certain necessary modifications, be acceptable for use by jurisdictions across the world. This article comments on the Global Principles from the perspective of a jurisdiction which has adopted the UNCITRAL Model Law on Cross-border Insolvency (“Model Law”). In 2008, Australia enacted a standalone statute, the Cross-border Insolvency Act 2008 (Cth) to which is annexed the Model Law. In that process, it made minimal changes to the Model Law text. Against the background of the 2008 Act, related procedural laws as well as Australia’s general insolvency statutes and recent cross-border insolvency jurisprudence, this article comments on the potential relevance of the Transnational Insolvency Report as a point of reference for Australian courts and insolvency administrators when addressing international insolvency cases. By comparing the Global Principles with the Model Law as closely adopted in Australia, this analysis is a resource for other Model Law jurisdictions when considering the potential relevance of the Global Principles for their own international insolvency practice.